No risk, no reward for food and beverage franchises in UAE

The high start-up costs for food and beverage franchises in the UAE can be daunting, entrepreneurs say.

“If I had known the costs before I started, I would not be here now,” said Iyad Ghanem, the managing director of Smart Brat, a German bratwurst grill concept, at Gulfood in Dubai. “My first outlet was temporary in Global Village six months ago and I think I will break even next month, which is good.

“However, I am Dh1 million in the hole with visas etc before I have opened my next permanent outlet in Dubai’s new Kite Beach development.”

However, Mr Ghanem hastens to add that “this is the first time I have ever done this ... and without risk there is no reward”.

But entrepreneurs such as Mr Ghanem are also the reason the F&B franchise sector in the Mena region is expected to grow at 7.4 per cent over the next four years, according to Euromonitor International.

The sector grew 4.3 per cent last year and was worth US$79.1 billion, making it the second-fastest growing in the world after the Asia-Pacific region. Dubai and Qatar beat that figure, growing at 5.3 per cent and 6 per cent respectively, Euromonitor figures show.

Fadi Malas, the former chief executive of Just Falafel, believes that the UAE has the capacity to take more international and home-grown franchises as long as the franchisee and franchisor have done their due diligence.

“The franchise opportunity in the UAE is ripe for further offerings,” said Mr Malas. “If you want to be a player in Dubai and beyond you have to have at least 12 outlets, which needs a growth plan. You only have to look at the growth in the population, the development of the city, the spread of malls and residential F&B to realise that it is a sector that needs feeding.

“Of course franchising is not an easy business but if you know the market you are targeting and know the food they want, at the correct price, then the brand will succeed. There are other factors but these are the basics.”

Murad Alnasur, the general manager of International Leisure Investment, a consultant to F&B franchisees, said entrepreneurs also need to factor in the cost of rents.

He said that A-grade locations such as popular malls, which are increasingly dominating the retail arena, are charging rents that smaller operators cannot sustain. “Your location is key, but forget the A locations if you are a small operator.

“Therefore you have to be the best B brand in a B location. Choose somewhere where there is more than food, people here eat for entertainment not just because they are hungry. Know your customer and what they want.”

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